(Updates prices; adds details on markets, comment about net longs) NEW YORK/LONDON, Sept 20 (Reuters) - Gold prices fell 1 percent on Wednesday after the U.S. Federal Reserve left interest rates unchanged but signaled it still expected to raise interest rates by year-end. Gold had been creeping higher in the minutes before the Fed released a statement about its latest two-day policy meeting, then reversed course and fell. It briefly sank below the $1,300 mark that traders had viewed as psychological support. Bullion hit $1,295.81 an ounce, the lowest since Aug. 28. As expected, the Fed also said it would start to reduce the portfolio of Treasuries and mortgages it acquired through its quantitative easing (QE) program after the financial crisis. New projections after the Fed meeting showed 11 of 16 officials favored higher benchmark U.S. interest rates by year-end. "The Fed came out and said they were going to do their QE reversal of about $10 billion a month; they still expect a Fed rate hike in December and three more in 2018. This puts a little pressure on gold," said Jeff Klearman, portfolio manager at GraniteShares, a provider and manager of exchange traded funds. Spot gold was down 0.76 percent at $1,301.2 an ounce by 3:55 p.m. EDT (1955 GMT), trading back above the $1,300 level. "The natural resistance is that hard number of $1,300," said Dan Denbow, portfolio manager at USAA Precious Metals and Minerals Fund. Benchmark U.S. Treasury yields jumped to their highest in six weeks, while Wall Street stocks fell after the Fed meeting.

The dollar turned higher against a basket of currencies, reversing an earlier drop. Bill O'Neill, co-founder of Logic Advisors, noted that speculative investors had added to their net long position in gold for nine straight weeks, making the market vulnerable to more selling. "A number of them are underwater so they're already in a losing mode," he said, adding that if gold slips much more "that would add a significant number of very weak longs in the market." He said gold selling could intensify if U.S. Treasury yields rise more or the dollar strengthens further. Rising bond yields make non-yielding assets such as bullion less attractive. A rising dollar also tends to hurt the value of gold.

Spot silver was down 1.27 percent at $17.10 an ounce, while platinum fell 0.63 percent at $942 an ounce. Palladium was up 0.39 pct at $912 an ounce. The most active U.S. gold futures for December